Hi Jerome!
I got it working but its not ideal. I set the field type back to zone from custom and it works.
If I select San Antonio / Texas, it charges 8.125% correctly,
If I set non-san antonio, Texas, it charges 6.25 correctly,
If I set it to some other state (really its the country code), it hides the city field (really the state code) and doesn't charge tax
While this works, I am sure it will be confusing to any customers when they are trying to put in their address.
ETA: I am using paypal for payments, Since this is a billing address, the customer could put an out of state address on this form, and give paypal a in-state address for shipping and avoid the sales tax.